2016 (11) TMI 534 - ITAT KOLKATA

2016 (11) TMI 534 - ITAT KOLKATA - TMI - Addition u/s 14A r.w.s Rule 8D - investment made by assessee in equity shares and bond - Held that:- We find that assessee has made investment in its equity shares and tax free bonds. The assessee in its return of income suo moto has disallowed the expense of ₹ 7,82,695/- under the provision of Sec. 14A r.w.s. Rule 8D of the IT Rules. In this regard, Ld. AR before us submitted that these expenses were disallowed by mistake as all the investments in .....

vestment made by assessee.
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with regard to investment made in the interest free bonds of HUDCO assessee has not brought anything on record to justify that such investment was made out of its own fund. At the time of hearing, Ld. AR requested the Bench to restore the matter back to the file of AO to check whether the investment was made out of the borrowed fund or own fund of assessee. To this point, Ld. DR raised no objection if the matter is restored back to the file of AO for fresh adjudi .....

int Ld. DR raised no objection if the matter is restored back to the file of AO for fresh adjudication. With the observation as above, and for the limited purpose set out above, the matter stands restored to the file of AO. - ITA No. 05/Kol/2014 - Dated:- 21-10-2016 - Shri Waseem Ahmed, Accountant Member And Shri K. Narsimha Chary, Judicial Member By Appellant : Shri V.N. Purohit, FCA By Respondent : Shri Anand Kr. Singh, JCIT-DR ORDER Per Waseem Ahmed, Accountant Member This appeal by the asses .....

- as made by A.O under section 14A of the IT Act, 1961 read with Rule-8D of the IT Rules 1962. (2) That the CIT(A) has likewise, erred in confirming the addition of ₹ 1,02,130/- as made by AO under section 40(a)(ia) of the T Act, 1961. Shri V.N. Purohit, Ld. Authorized Representative appeared on behalf of assessee and Shri Anand Kumar Singh, Ld. Departmental Representative appeared on behalf of Revenue. 2. First issue raised by assessee in its appeal is that Ld. CIT(A) erred in confirming .....

eedings, AO observed that as per tax audit report the assessee has disallowed a sum of ₹ 7,82,695/- u/s 14A of the Act. The AO also observed that assessee has disallowed less expense as per the provision of Sec. 14A r.w.s Rule 8D of the IT Rules. Accordingly, AO invoked the provision of Sec. 14A r.w.s 8D of the IT Rules and made disallowance of ₹ 8,80,905/- and added to the total income of assessee. 4. Aggrieved, assessee preferred an appeal before Ld. CIT(A) whereas assessee submitt .....

as under:- 5. I have considered the submission of the appellant and perused the assessment order. On careful consideration of the facts, I am not inclined to agree with the submission of appellant. It is observed that the tax auditor has computed the disallowance u/s. 14A by applying the provisions of Rule 8D at ₹ 7,82,695/- having regard to books of account of the appellant company as the tax audit was completed by him. Therefore, it is not correct to say that the auditor has committed a .....

. In view of above, it is held that the AO was justified in making disallowance u/s. 14A read with Rule 8D at ₹ 8,80,905/- which includes disallowance of ₹ 7,82,695/- computed by the Tax Auditor and accepted by the appellant in its return of income. The disallowance made by the AO is confirmed. The ground no. 1 is dismissed. Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before us. 5. Before us Ld. AR submitted that the investments have been made by assess .....

sed the materials available on record. From the aforesaid facts, we find that assessee has made investment in its equity shares and tax free bonds. The assessee in its return of income suo moto has disallowed the expense of ₹ 7,82,695/- under the provision of Sec. 14A r.w.s. Rule 8D of the IT Rules. In this regard, Ld. AR before us submitted that these expenses were disallowed by mistake as all the investments in equity shares are strategic investment. In rejoinder, Ld DR has not brought a .....

e Lucknow Tribunal in the case of U.P. Electronics Corporation Ltd. Vs. DCIT (2015) 43 CCH 0068. The relevant extract of the order is reproduced below. Income-Expenditure incurred in relation to income not includible in total income-AO made addition of ₹ 40,31,477/- u/s 14A r/w/r 8D having noticed that assessee had shown dividend income of ₹ 7,52,120/- which were exempted from tax-AO computed Corresponding expenditure as per rule 8D (iii) at ₹ 40,31,477/- and made addition of s .....

by AO with regard to correctness of claim of assessee is mandatorily required in terms of section 14A(2)-Moreover, investment was made in case of subsidiary companies, therefore, in those cases disallowance under section 1A(2) of Act cannot be worked out unless and until it is established that certain expenditures are incurred by assessee in these investments-Keeping in view totality of facts and circumstances of case invocation of rule 8D without recording objective satisfaction by AO is not pr .....

e investment was made out of the borrowed fund or own fund of assessee. To this point, Ld. DR raised no objection if the matter is restored back to the file of AO for fresh adjudication. Considering the facts and circumstances of the case and in the interest of justice and fair play we are inclined to restore the matter back to the file of AO to adjudicate the matter afresh as per law with the direction to check whether the investment in HUDCO bonds were made out of own fund of assessee. Hence, .....